Do we have to pay an employee who terminated employment before completing Form I-9?

Yes. An incomplete I-9 form does not affect an employer's ability or obligation to pay an employee. The I-9 form is used to verify eligibility to work in the U.S. and does not affect payroll. The Fair Labor Standards Act (FLSA) requires employers to pay an employee who performs work, even if the employee is found to be unauthorized to work in the U.S. or quits employment prior to completing the I-9 form.

In addition, the Internal Revenue Service (IRS) expects employers to withhold payroll taxes from employees, regardless of the status of their I-9 form and documentation. Employers should use the information on the employee's W-4 to process payroll, regardless of whether the I-9 is completed.

To satisfy both the DOL and IRS requirements, the employer must pay the employee all wages due and ensure that the appropriate taxes are paid to the IRS. The Social Security Administration and IRS provide guidance on reporting taxes on an employee who does not have a Social Security number.

To avoid this problem altogether, employers may choose to require work authorization before permitting new employees to start work. Employers may complete an I-9 form as soon as an offer of employment is made and accepted. Careful planning and a well-executed process for hiring will save employers time and trouble in the long run.